Launching an international version of any famous U.S. ETF is now common among ETF issuers. The market has already seen the success of Market Vectors Morningstar Wide Moat Research ETF (MOAT) which was launched in 2012 and has amassed $892.5 million in assets. Following the fad, Van Eck recently launched an international ETF – Morningstar International Moat ETF (MOTI) – on the same wide-moat concept (read:Van Eck Launches Morningstar Wide Moat Research ETF (MOAT)).
MOTI in Focus
The ETF looks to track the Morningstar Global ex-US Moat Focus Index and apply the ‘wide moat’ strategy by allocating heavily to the financial sector (48.8%), followed by materials (12%) and consumer discretionary (8.5%). This suggests that the product carries concentration risks from a sector perspective.
From an individual security perspective, some of the top ‘wide moat’ companies include Sun Pharmaceutical Industries Ltd, Ambuja Cements and Wharf Holdings, though none of the stocks holds more than 2.36% of the basket.
From a geographical point of view, the fund is heavy on Australia with 21.7% exposure followed by over 15% invested in Canada and 13% in India. The net expense ratio of the fund is 56 basis points a year.
How Does it Fit in a Portfolio?
MOTI could be an interesting choice for value-focused investors. It hones in on global stocks (ex-U.S.) having notable competitive advantages than those of their peers. Generally speaking, these competitive advantages can be of various sorts including brand name, networking effects, economies of scale and so on. These attributes make it harder for a new entrant or a relatively weak player to grab market share from the company enjoying these advantages.
The global macroeconomic backdrop remains choppy this year with the Greece debt default drama and its negative impact spilling all over the market in the last one month, the Chinese economy continuing to waver, and the strengthening greenback and its adverse impact on the global commodity market as well as commodity-rich nations (read: The Wide Moat ETF (MOAT) Explained).
In such a scenario, investing in wide-moat international stocks could be interesting options to ride out the volatility while at the same time staying invested in the high risk conventional asset classes (read: 3 Tax Efficient ETFs for Your Portfolio).
ETF Competition
In terms of ETFs in the foreign large cap world, investors are spoilt for choice. However, none of the ETFs follow the same investment goal as MOTI. Still, the fund might face competition from smart-beta international ETFs including iShares MSCI EAFE Value ETF (EFV), iShares MSCI EAFE Minimum Volatility ETF (EFAV) and Morningstar Developed Markets ex-US Factor Tilt Index Fund (TLTD).
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MKT VEC-MS IM (MOTI): ETF Research Reports
MKT VEC-WIDE MT (MOAT): ETF Research Reports
ISHARS-MS VL (EFV): ETF Research Reports
FLEXS-MR DMXUSF (TLTD): ETF Research Reports
ISHARS-MS EMVIF (EFAV): ETF Research Reports
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